by John Dankosky - With Governor Rell and state lawmakers looking for ways to cut next year’s budget deficit, two of the state’s leading economists told Where We Live the government needs to come up with bigger solutions.
According to UConn’s Fred Carstensen and the CBIA‘s Pete Gioia, The $726 million dollar gap in next year’s budget is being filled with too many one-time tricks, including federal stimulus dollars that might not be flowing to the states, and an economic recovery that might be slow to reach Connecticut. (Find out more in this story by The Connecticut Mirror’s Keith Phaneuf)
Then, even if we find a way to fill this gap, the economists say there’s always the 2012 budget hole to deal with. That stands at 3.88 billion, and could swell to 6 billion by some estimates. So, what to do?
Gioia said that state lawmakers need to make big changes – soon.
“They’re doing things the same way because they’ve always done them that way. Perhaps because it’s easier, perhaps because of inertia. And they’re not rolling up their sleeves, looking at what are the basic fundamentals of what we’re doing. And saying ‘We’ve got to do it different, we’ve got to do it smarter,’ and that over the long term produces significant savings, with the the least amount of damage to people who really do need services. “
Gioia suggested an overhaul of long-term care that he estimates could save $600 million a year in Medicaid payments by providing more at home-care. Carstensen says he sees another big savings in the criminal justice system through drug courts and other alternatives to incarceration.
“We have phenomenal incarceration rates, we put non-violent offenders in prison, which makes them into lifetime criminals…a phenomenal recidivism rate. Costs us over 40-thousand a year for each one. Probably of the current population, probably 7000 don’t even need to be there, because they’re non-violent offenders and never had a violent incident. We could probably save $200-million a year just on reforming the way we handle the corrections system.”
Senate President Don Williams told the economists that the state does need to get an early start on the multi-billion dollar deficit that’s looming in 2012, and has proposed agency consolidations that would have a long-term effect – but not produce savings right away.
Williams said that one big change could be the “sunsetting” of some of the state’s many corporate tax incentives – many of which he called “dinosaurs” that don’t generate any real economic benefit for the state. That’s something Carstensen agrees with – he talked about a 2005 study that showed “that the corporate tax rate reductions, and the credit and exemption programs enacted in the early 1990s have been a mixed and small success for the Connecticut economy.”
The economists also addressed calls to raise income taxes on the state’s wealthiest residents – an idea Gioia said was subject to the “volatility” of the economy. But Jamey Bell of Connecticut Voices for Children called in to say that more tax revenue is part of a “balanced” approach to rebuilding a sustainable budget (Voices has their own economic development and budgeting ideas online here).
Mostly, the business economist and the academic economist agreed on the biggest systemic problem: Connecticut’s not doing enough to create more jobs, and is losing out to more aggressive states like Minnesota, Oregon, and Tennessee which have robust programs to court business and bring in federal dollars.
Gioia even suggested an alternative to the state’s long-standing (and well-earned) moniker “The Land of Steady Habits.” He calls it “The State That Walks Backwards.”